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Low income families face 22 year wait for deposit

Low income families face 22 year wait for deposit

Category: Mortgages

Updated: 23/01/2012
First Published: 23/01/2012

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Lower income households in the UK would now have to save for an average of 22 years in order to build up a pot big enough for a typical first time buyer deposit, it has been revealed.

The shock statistic is included in the Squeezed Britain report which has been compiled by Resolution Foundation.

The think tank's definition of the lower to middle income (LMI) household to which the figure applies includes a couple without children living on a gross annual household income of between £12,000 and £29,000, or a couple with two children earning between £17,000 and £41,000.

The report reveals that almost a third (31%) of working-age households in the UK fall into this category.

The current 22 year wait to build up a sufficient sized deposit compares extremely unfavourably with the period of eight years it took in 2001, and just four years in 1991.

As a consequence, the number of LMIs under 35 and owning a home has nose dived over the past six years from 51% to 34%.

At the same time, the proportion of the group in question renting privately has more than tripled from 14% in the late 1980s to 47% at present.

The report suggests that the main problem stems from the relative scarcity of higher loan-to-value mortgages.

"While the aspiration for home ownership remains strong, a radical shift is taking place in the housing market with LMIs under 35 finding it increasingly difficult to get on the housing ladder," said the report.

"With limited mortgage availability for first-time buyers, historically high house prices and stagnant wages, many in this group are finding themselves stuck in private rented accommodation.

"Meanwhile, those in the group who are already home owners face a precarious future as they contemplate the prospect of higher mortgage payments when interest rates eventually rise."

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